Genius Group Limited (GNS)

[DDA]

https://www.bloomberg.com/opinion/articles/2023-06-13/naked-short-seller-gets-in-trouble

There is, however, a good (illegal! but possibly lucrative) real use case for naked shorting, albeit sort of a strange and specialized one. It goes like this:

A publicly traded company is having some tough times and is looking to raise a bit of money. Ordinary financing options like a bond deal or a public stock offering are not available for whatever reason, so the company is looking for weird trades.
You arrange to buy some stock from the company, in the future, either at a fixed price or at some floating price indexed to the market price. So you sign a contract to buy 1 million shares two weeks from now at $1 per share (a fixed price), or to buy 1 million shares two weeks from now at the volume-weighted average price 3 of the stock over next two weeks (a floating price). You are giving the company money, and you are getting back stock, and because the company is a bit desperate you get a pretty good deal.
The stock is trading at, like, $1.25 today: You are getting a discount, buying at $1, because the company needs the money. (Or if you are buying at a floating price, it might be at a discount to the average market price.)
If you could sell 1 million shares at $1.25 today, then in two weeks you will buy them at $1, and you will make a $250,000 guaranteed profit. Whereas if you wait the two weeks, buy the shares at $1, and then sell them, maybe the stock will be below $1 by then and you will lose money. This company is risky! You want to lock in the profit now. (Similarly, but slightly more complicated, with a floating price: You want to sell the stock over the two-week period so you can get the average price, rather than waiting to buy at that price and then sell at whatever the price is in two weeks.)
But, look: If you have this sort of arrangement with this sort of troubled company, there is a good chance that it is hard to borrow 1 million shares. The company is small, its stock doesn’t trade that much, probably a lot of people have already borrowed it to short it. So you have to pay a large borrow fee, or more likely you simply cannot find 1 million shares to borrow at any price.
If you just naked shorted the stock, and sort of strung your brokers along for two weeks, you’d be fine: Sell at $1.25 today, buy at $1 in two weeks, and deliver the 1 million shares you bought to close out your short position. No harm done!
This is illegal in part because you are unfairly ducking the costs of short selling, but also because it is kind of a scammy way to do a stock offering: You are basically able to lock in a big profit by selling the stock to the company’s public shareholders before you buy it from the company, and it seems a bit unfair.